PARIS, Jan 24 (Reuters) - Shares in Suez fell to their lowest level in more than four years after the French water and waste utility cut its 2017 earnings targets, partly because of the impact of political turmoil in Catalonia.

Suez, the leading water provider in Spain, decided in October to move legal registration of its offices to Madrid from Catalonia because of legal uncertainty related to Catalonia’s independence movement.

The company, the world’s largest water supplier and waste manager after French peer Veolia, said late on Tuesday that the related costs were one of the reasons for its lower 2017 earnings outlook.

It had expenses of 45 million euros ($55.5 million) in the last three months of the year related to Spain and a decision to terminate two services contracts in Casablanca, Morocco, and Mumbai, India.

In 2016, Suez earned 2.5 billion euros of its 15.3 billion revenue in Spain — around 16 percent of the total.

“We had been cautious on the growth profile in International, and believe the issues faced in India and Morocco bring to the fore certain risks that have been underestimated,” Credit Suisse said in a note.

With the lion’s share of their revenue coming from municipal clients, Suez and Veolia are sensitive to regulatory changes and budget cuts. The two global water operators are both trying to reduce their dependence on municipal water clients by diversifying into the industrial water market.

Suez’s 3.2 billion euro acquisition of GE Water last year was part of that strategy and will boost the revenue share of industrial clients to 40 percent from 34 percent.

Suez said its earnings before interest and taxes (EBIT) would fall 2 percent in 2017, downgrading a previous target for slight organic growth. Suez, which will report detailed annual earnings in March, added it expected organic EBIT growth to accelerate to about 3 percent in 2018.

The firm also said it planned to pay a 0.65 euro per share dividend on its 2017 earnings. It had said before that it was aiming to pay at least that much.

Dividend policy is a key issue for utility stocks, and Suez shares slumped as much as 19 percent, making the stock the worst performer on France’s SBF-120 index and on the pan-European STOXX 600 index.

By late afternoon they were down 16 percent on the day, in the shares’ worst fall and in their biggest trading volume since 2008.

Bank of America Merrill Lynch (BAML) cut its rating on Suez to “underperform” from “neutral.”

“We think Suez can start to turn around its fortunes post-2018 by aggressively increasing cost cutting and pushing for organic growth,” the investment bank wrote in a note.

Other brokers weighed in with downgrades, with Royal Bank of Canada cutting Suez to “sector perform” from “outperform.”

Morgan Stanley kept an “equal weight” rating on Suez but added that there were concerns over its dividend coverage. ($1 = 0.8102 euros) (Reporting by Sudip Kar-Gupta; Additional reporting by Thyagaraju Adinarayan and Geert De Clercq; Editing by Keith Weir and Hugh Lawson)